Fragmentation v Consolidation - 8 April 2011

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Seems like equity and other capital marketplaces are going
through the ying and yang of fragmentation and consolidation.
Just as we hear about another merger, we read about another new venue going live or
more regulation encouraging competition. This
provides market participants with a problem, especially in terms
of understanding the execution quality they are enjoying and in
knowing which venues are must-haves (and which ones can safely be
ignored for now).

In Europe, the lack of a consolidated tape has emerged as a
universal and justifiable gripe amongst the buy-side community.
As well as making it difficult for them to understand how good
their execution quality really is, it also makes it difficult to
accurately value their investments. The sell-side, too, wants to
be able to prove its bona fides in terms of best-ex and,
of course, venues of all shapes and sizes want to demonstrate
their relevance to different segments of the trading community.

None of this is lost on the European regulators but, the question
remains, what are we all going to do in the meantime whilst the
regulators and the industry work to solve the problem? How will
we get any independent view as to whether any particular
execution was best, good enough, or simply inadequate?